BLOG: Facebook IPO: Why your data is worth $93 billion

Mark Sullivan |
May 21, 2012

"If the product is free, you are the product."

"If the product is free, you are the product."

At first glance that little maxim might seem cryptic, but it's an apt description of the nature of Facebook's service, and a needed heads-up for anyone who uses it. Although Facebook is a free service, the social networking site acts as a mechanism for capturing highly personal user information--Facebook's real product. That's your information. You are the product."

All of the discussion and speculation surrounding the Facebook IPO over the past month has served as an introduction to the new "personal data economy" for many people. Facebook--and a thousand other smaller companies like it--are in the business of collecting and monetizing personally identifiable information (aka PII).

Facebook is already doing good business in taking advantage of this data to target ads on its own site. If you mention the Dallas Cowboys in one of your updates, for instance, you may see an ad for the team's paraphernalia.

A couple of months from now, however, when the glow of the IPO has faded, Facebook's shareholders will be asking Facebook what it can do to increase revenues from existing businesses, and how it can develop new revenue streams.

And that's when things could get very interesting from a privacy perspective--and, potentially, very dangerous. As Facebook nears 1 billion users, the mountain of highly detailed personal information the company is sitting on is larger than anything ever amassed by any company or government in history. The fact that that huge store of data is in the hands of a young, private company run by a 28-year-old billionaire is, well, a sign of the times.

I'm not blowing the horns of doom here. In fact, despite a number of unexpected moves to make more user data "public," Facebook has kept its promise not to sell or license large chunks of its social graph to marketers and advertisers. It has also made a number of changes to its service that give users more control over privacy, such as the ability to determine who (friends, friends of friends, or everyone) sees each and every piece of content.

But Facebook has also continued to make moves that make you wonder where the company really stands on privacy. It has been slowly rolling out facial recognition technology that could identify users and automatically attach their names to photos in which they appear--without their knowledge or consent. The addition of the millions of photos Facebook bought in its acquisition of Instagram only adds to the worry over facial recognition.

Pursuing New Revenue Streams

Going public can have a dual effect on companies. Admittedly, they do become more accountable and transparent because of the filings they must make with the SEC. But those filings can also offer investors more information on revenue streams that are not in current development, giving the investors more fodder to put pressure on the company's board to start development, pronto.